Citi Ties up With Chinese Stock Brokerage to Form Citi Orient Securities

Citi Bank's Global Markets division has teamed up with China’s Orient Securities to form Citi Orient Securities Company Ltd, a Shanghai based equity and debt brokerage which has a registered capital of RMB 800 billion,

The joint-venture will engage in investment banking business in the Chinese domestic market, including equity and debt securities underwriting. Orient Securities will have a 66.7 percent stake in the new entity, with the remaining 33.3% owned by Citigroup Global Markets Asia.

Foreign firms are unable to invest without a local Chinese partner. Orient Securities Co Ltd. operates as a financial advisory company. The company was founded in 2000 and is based in Shanghai, China.

Orient Securities has been performing well despite the slowdown in the Chinese equity markets. The bank outperformed the industry in 2011 when it had growth of 11% whereas the market grew only 0.03%. In January-June of 2011, the company achieved sales revenue of RMB 1.68 billion, an increase of 33% on year-on-year basis, net profit of 660 million yuan, and an increase of 21% on year-on-year basis. The total assets reached 38.4 billion yuan, a year-on-year increase of 7%; net assets 9.8 billion yuan, a year-on-year increase of 11%.

Citi Group has had a physical presence in China since 1902, in 2007 Citi Bank was officially approved by the China Banking Regulatory Commission to offer retail based products.

Stephen Bird, chief executive of Citi Asia Pacific, said the joint venture aims to be a leading investment bank in China, capitalizing on Orient Securities' deep local network as well as Citi's global network and client base.

"Our partnership with Orient Securities will complement the work we already do globally for our Chinese clients. It underlines our commitment to offer clients local capital market solutions," the statement quoted Mr. Bird as saying.

Citi Group joins major banks such as UBS AG, Goldman Sachs Group, Credit Suisse and Morgan Stanley, which have set up similar investment banking ventures in China.

Foreign invested Chinese Securities Firms include:

• Morgan Stanley Huaxin Securities Co Ltd.
• Goldman Sachs Gao Hua Securities Co Ltd.
• Credit Suisse Founder Securities Limited.
• UBS Securities Co Ltd.

Chinese capital markets have come along way since the economy was liberalised in the 90's (1990), China the second largest economy (GDP terms) has a developed equity and futures market. The Shanghai Stock Exchange has an average daily trade volume of $10 billion.

Forex Magnates research team have written a detailed report on China's thriving OTC FX market, available in the Q2 quarterly report 2012.